What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-13 · 149 added, 76 removed, 225 unchanged (50% of the section changed)

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We are currently focused on developing cemacabtagene ansegedleucel (cema-cel, previously ALLO-501A) in large B-cell lymphoma (LBCL) and chronic lymphocytic leukemia (CLL).

We plan to initiate a pivotal Phase 2 clinical trial (ALPHA3) in mid-2024 for cema-cel as part of a first line (1L) treatment plan for newly diagnosed and treated LBCL patients who are likely to relapse and need further therapy.

In June 2024, we initiated a pivotal Phase 2 clinical trial (ALPHA3) for cema-cel as part of a first line (1L) treatment plan for newly diagnosed and treated LBCL patients who are likely to relapse and need further therapy.

The design of the ALPHA3 1L consolidation trial builds upon the results demonstrated in the Phase 1 ALPHA2 trial and leverages an investigational diagnostic test developed by Foresight Diagnostics, Inc.

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One lymphodepletion arm will be discontinued following a planned interim analysis in mid-2025 designed to select the most appropriate regimen for this patient population.

The efficacy analysis is expected to occur in 2026 and will include the Independent Data Safety Monitoring Board (IDSMB) interim efficacy analysis in the first half of 2026 and the data readout of the primary analysis is expected in the second half of 2026 with a biologics license application (BLA) submission targeted for 2027.

ALPHA3 is expected to complete enrollment in the first half of 2026.

Efficacy analyses are expected to occur in 2026, and will include the Independent Data Safety Monitoring Board (IDSMB) interim EFS analysis in the first half of 2026 and the data readout of the primary EFS analysis is expected year-end 2026.

A biologics license application (BLA) submission is targeted for 2027.

In view of the potential of the earlier line ALPHA3 trial, we have deprioritized the third line (3L) LBCL ALPHA2 and EXPAND trials.

We have initiated the Phase 1b cohort of our ALPHA2 trial to evaluate cema-cel following lymphodepletion with fludarabine/cyclophosphamide and ALLO-647 in patients with relapsed/refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL).

This cohort will include up to 40 patients, and we expect to release initial data by year-end 2024.

We are enrolling a Phase 1 clinical trial (TRAVERSE) of ALLO-316, an allogeneic CAR T cell product candidate targeting CD70, in adult patients with advanced or metastatic RCC.

This cohort will include up to 40 patients, and we expect to release initial data in early 2025.

We are enrolling a Phase 1 clinical trial (TRAVERSE) of ALLO-316, an allogeneic CAR T cell product candidate targeting CD70, in adult patients with advanced or metastatic clear cell renal cell carcinoma (RCC).

We presented interim results from the TRAVERSE trial at the American Association of Cancer Research (AACR) Annual Meeting in April 2023.

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The algorithm is designed to mitigate the treatment-associated hyperinflammatory response without compromising the CAR T function needed to eradicate solid tumors.

The next update from this trial is planned for a medical forum in the second quarter of 2024 and will discuss the algorithm.

A more robust data update from the ongoing trial with the updated protocol is planned for later in 2024.

A data update from patients with CD70 positive RCC, which will include details on the algorithm, is planned by year-end 2024.

We are developing ALLO-329, a next-generation allogeneic CAR T cell product candidate targeting both CD19 and CD70 for the treatment of certain autoimmune diseases (AID).

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We plan to file an investigational new drug (IND) application in the first quarter of 2025.

We expect to initiate the Phase 1 trial with ALLO-329 in early 2025 and have proof-of-concept by year-end 2025.

Initiation of this Phase 1 trial with ALLO-329 is expected in early 2025.

We expect to initiate the Phase 1 trial with ALLO-329 in the first half of 2025 and have proof-of-concept by year-end 2025.

We are developing an anti-CD52 monoclonal antibody, ALLO-647, which is a proprietary component of our lymphodepletion regimen.

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Patients will be randomized to receive cema-cel and a lymphodepletion regimen with fludarabine and cyclophosphamide either with or without ALLO-647.

We plan to select the lymphodepletion regimen with which we will complete enrollment in the study (Part B) in the first half of 2025.

In mid-2025, we plan to select the lymphodepletion regimen with which we will complete enrollment in the study (Part B).

While we have additional programs in our pipeline, our development priorities are focused on cema-cel (1L Consolidation and CLL), ALLO-316, and ALLO-329.

We will explore opportunities to partner with collaborators on product candidates across our pipeline.

In May 2024, we entered into an Amendment and Settlement Agreement (the Servier Amendment) under which we expanded the geographic territory for our license to include the European Union and the United Kingdom.

The Servier Amendment also grants us an option to further expand the licensed territory to include China and Japan upon the objective showing of sufficient resources to develop licensed products in those countries, which could be met through the Company entering into a strategic partnership covering those countries.

We estimate that the expansion of our license for the CD19 Products to the European Union and United Kingdom will substantially increase our market opportunity in 1L consolidation LBCL and R/R/ CLL from more than $6.0 billion in the U.S.

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Since inception, we have had significant operating losses.

Our net loss was $65.0 million for the three months ended March 31, 2024.

As of March 31, 2024, we had an accumulated deficit of $1.6 billion.

As of March 31, 2024, we had $397.3 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2026.

Our net losses were $66.4 million and $131.4 million for the three and six months ended June 30, 2024, respectively.

As of June 30, 2024, we had an accumulated deficit of $1.7 billion.

As of June 30, 2024, we had $444.6 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2026.

We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses and general and administrative expenses will continue to increase.

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Asset Contribution Agreement with Pfizer

In April 2018, we entered into the Pfizer Agreement with Pfizer pursuant to which we acquired certain assets and assumed certain liabilities from Pfizer, including agreements with Cellectis and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer.

In April 2018, we entered into an Asset Contribution Agreement (the Pfizer Agreement) with Pfizer pursuant to which we acquired certain assets and assumed certain liabilities from Pfizer, including agreements with Cellectis S.A.

(Cellectis) and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer.

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Pfizer Agreement.

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Exclusive License Agreement with Servier

In October 2015, Pfizer entered into the Servier Agreement with Servier to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products, including UCART19, in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

In October 2015, Pfizer entered into an Exclusive License Agreement with Servier (the Original Servier Agreement) to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products, including UCART19, in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

In April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement.

In October 2019, we agreed to waive our rights to the one additional target.

In May 2024 we entered into the Servier Amendment with Servier under which the parties settled disputes relating to each party’s performance under the Servier Agreement.

The parties agreed to waive any and all outstanding claims that were asserted relating to alleged violations of the Servier Agreement, including all claims that such party was entitled to various payments or refunds from the other party under the Servier Agreement, and mutual releases with respect to such claims were granted.

Additionally, the Servier Amendment expanded our territory under the Servier Agreement to include the European Union and the United Kingdom, and provides for an option to further expand our territory to include China and Japan

In May 2024, the Servier Amendment expanded our territory under the Original Servier Agreement to include the European Union and the United Kingdom, and provides for an option to further expand our territory to include China and Japan

upon the objective showing of sufficient resources to develop licensed products in those countries, which could be met through us entering into a strategic partnership covering those countries.

Additionally, we agreed to waive certain of its rights under the Servier Agreement to elect a conversion of its license to the CD19 Products to a worldwide license.

Additionally, under the Servier Amendment all of our future milestone payments (regulatory and sales) under the Servier Agreement are modified to be the same as, and to coincide with, Servier’s milestone payments to Cellectis under the Servier-Cellectis Agreement.

As amended by the Servier Amendment, the Servier Agreement provides for aggregate potential payments by us to Servier of up to €75 million, of which €60 million remains, upon successful completion of various regulatory milestones in the United States, European Union and the United Kingdom for the initial indication of each licensed product, with additional payments of €55 million due for each subsequent indication, and aggregate potential payments by us to Servier of up to €80 million upon achievement of certain net sales milestones for each licensed product.

Additionally, we agreed to waive certain of our rights under the Servier Agreement to elect a conversion of our license to the licensed products directed against CD19, including UCART19, ALLO-501 and cema-cel (collectively, CD19 Products) to a worldwide license.

Additionally, under the Servier Amendment all of our future milestone payments (regulatory and sales) under the Original Servier Agreement were modified to be the same as, and to coincide with, Servier’s milestone payments to Cellectis under a first development and commercialization agreement, dated February 7, 2014, by and between Cellectis and Servier (as amended, the Servier-Cellectis Agreement).

The Servier Agreement provides for aggregate potential payments by us to Servier of up to €75 million, upon successful completion of various regulatory milestones and first commercial sale milestones in the United States, European Union and the United Kingdom for the initial indication of each licensed product, of which €60 million remains for the initial indication for cema-cel, with additional payments of €55 million due for each subsequent indication, of which €50 million remains for the first subsequent indication for cema-cel, and aggregate potential payments by us to Servier of up to €80 million upon achievement of certain net sales milestones for each licensed product.

Should Servier’s rights and obligations under the Servier-Cellectis Agreement be assigned to us, these milestone payments would terminate, and we would assume Servier’s milestone payment obligation to Cellectis.

In the absence of any such assignment, Servier will remain responsible for making milestone payments that may be due to Cellectis under the Servier-Cellectis Agreement.

As part of the settlement, we agreed to transfer €20 million into an escrow account in connection with a potential future milestone payment, which is included in the remaining €60 million in milestone payments referenced above.

milestone payment will be triggered, if at all, upon the occurrence of one of these events:

(1) we dose the first subject in its first phase 3 clinical study for a CD19 CAR-T product that is a licensed product under the Servier Agreement, (2) we submit a phase 2 clinical study for a licensed product to the U.S.

Food and Drug Administration or the European Medicines Agency, and such phase 2 clinical study is accepted for regulatory approval as a pivotal study, or (3) a final and definitive decision of a tribunal or court finding that under the corresponding milestone under the Servier-Cellectis Agreement has occurred and the €20 million payment is due to Cellectis.

The royalties under the Servier Agreement were also amended.

The milestone payment will be triggered, if at all, upon the occurrence of one of these events:

(1) we dose the first subject in our first phase 3 clinical study for a CD19 CAR-T product that is a licensed product under the Servier Agreement, (2) we submit a phase 2 clinical study for a licensed product to the U.S.

Food and Drug Administration or the European Medicines Agency, and, based on its results, such phase 2 clinical study is accepted for regulatory approval as a pivotal study, or (3) a final and definitive decision of a tribunal or court finding that under the corresponding milestone under the Servier-Cellectis Agreement has occurred and the €20 million payment is due to Cellectis.

The royalties under the Original Servier Agreement were also amended.

The amended royalties include tiered royalties on annual net sales in the United States and a flat royalty on annual net sales in territories outside the United States.

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This royalty obligation begins upon the first commercial sale of such product in a given country and ends after the later of a defined number of years or the expiration of the last to expire licensed patent covering the product in such country.

The net effect of the Servier Amendment is that our royalty rate in the United States for the first half of the first tier of net sales was increased by a low single digit percentage.

Should Servier’s rights and obligations under Servier-Cellectis Agreement be assigned to us, each tier of royalty rates in the United States to Servier would be reduced by 10%, the ex-U.S.

The net effect of the Servier Amendment is that our royalty rate in the United States for the first half of the first tier of net sales was increased by a low single digit percentage as compared to the Original Servier Agreement.

Should Servier’s rights and obligations under the Servier-Cellectis Agreement be assigned to us, each tier of royalty rates in the United States to Servier would be reduced by 10%, the ex-U.S.

royalties to Servier would terminate, and we would assume Servier’s royalty obligations to Cellectis.

In the absence of any such assignment, Servier will remain responsible for making royalty payments that may be due to Cellectis under Servier-Cellectis Agreement.

In the absence of any such assignment, Servier will remain responsible for making royalty payments that may be due to Cellectis under the Servier-Cellectis Agreement.

For more information, see “Risk Factors— Servier’s discontinuation of its involvement in the development of CD19 Products and Servier's disputes with Cellectis, or future disputes with us, may have adverse consequences.

See Notes 6 and 13 to our condensed consolidated financial statements included elsewhere in this report for further description of the Servier Agreement and the Servier Amendment.

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Servier Agreement.

Collaboration and License Agreement with Notch

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In addition, with respect to our previous equity investments in Notch, the Amended Notch Agreement grants us certain anti-dilution protections up to certain limits for certain pre-IPO equity financings.

On May 17, 2024, Notch completed the Notch Series B Financing.

Although we did not participate in the Notch Series B Financing, we received Series B preferred stock of Notch pursuant to our anti-dilution rights.

In connection with the Notch Series B Financing, we waived certain of our anti-dilution rights in exchange for a low single digit percentage reduction in the royalty rate for the royalties we are obliged to pay to Notch under our Notch intellectual property license should we commercialize a licensed product.

We also waived our right to appoint one member of the Notch board of directors, but retained board observation rights.

As a result of the Notch Series B Financing, our ownership interest in Notch was reduced from 23% to approximately 13%.

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Notch Agreement.

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See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the agreement with MD Anderson.

License Agreement with Allogene Overland Biopharm (CY) Limited

License Agreement with Allogene Overland Biopharm (PRC) Co., Limited

On December 14, 2020, we entered into a License Agreement with Allogene Overland Biopharm (CY) Limited (Allogene Overland) (the License Agreement), a joint venture established by us and Overland Pharmaceuticals (CY) Inc.

(Overland), pursuant to a Share Purchase Agreement, dated December 14, 2020, for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies for patients in greater China, Taiwan, South Korea and Singapore (the JV Territory).

(Overland), pursuant to a Share Purchase Agreement (Share Purchase Agreement), dated December 14, 2020, for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies directed at four targets, BCMA, CD70, FLT3, and DLL3 (Overland Licensed Products) for patients in greater China, Taiwan, South Korea and Singapore (the JV Territory).

Allogene Overland subsequently assigned the License Agreement to a wholly owned subsidiary, Allogene Overland BioPharm (HK) Limited (Allogene Overland HK).

On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland Biopharm (PRC) Co., Limited.

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the License Agreement and Share Purchase Agreement with Allogene Overland.

On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland Biopharm (PRC) Co., Limited (Allogene Overland PRC).

See Note 6 to our condensed consolidated

financial statements included elsewhere in this report for further description of the License Agreement and Share Purchase Agreement.

On May 24, 2024, we, Overland and Allogene Overland entered into a Share Exchange Agreement (Share Exchange Agreement) pursuant to which Overland’s cell therapy business merged into Allogene Overland (the Organizational Restructuring).

Under a separate agreement between Overland and HH BioPharma Holdings Ltd.

(HBP) executed on May 24, 2024, Overland distributed all Series Seed Preferred Shares of Allogene Overland held by Overland to HBP and HBP has assumed all rights and obligations attached to such shares and all rights and obligations of Overland under the Share Exchange Agreement.

In connection with the Organizational Restructuring, on May 24, 2024, we and Allogene Overland PRC entered into a First Amendment to Exclusive License Agreement (the License Amendment) to amend and supplement certain provisions of the License Agreement.

Under the License Amendment, we continue to grant Allogene Overland PRC an exclusive license to develop, manufacture, and commercialize the Overland Licensed Products in the Territory, with us retaining exclusive rights to the Overland Licensed Products outside the JV Territory, and the royalty obligations to us were amended to a flat mid single-digit royalty on net sales in the JV Territory that are no longer subject to reductions as previously provided.

The License Amendment also provides us with additional rights to terminate the License Agreement in its entirety or with respect to the relevant Overland Licensed Product(s) if Allogene Overland PRC fails to initiate manufacturing technology transfer with respect to an Overland Licensed Product as agreed in the License Amendment, or if HBP commits a funding default or a material breach of its representations, warranties, or covenants under the Share Exchange Agreement.

The License Amendment also provides that the License Agreement will terminate automatically if our ownership in Allogene Overland falls below 7.5% (other than due to our sale of the shares of Allogene Overland), unless at that time we and Allogene Overland PRC have mutually agreed on the manufacturing technology transfer plan for the Overland Licensed Product(s) and Allogene Overland PRC elects to continue the license for such Overland Licensed Product(s) with increased milestones and royalties.

Under the License Amendment terms such increased milestones and royalties consist of up to $115 million in milestone payments for each Overland Licensed Product and tiered mid single-digit to low double-digit royalties on net sales in the JV Territory.

As part of the Organizational Restructuring, Allogene Overland was renamed to Overland Therapeutics Inc.

(Overland Therapeutics).

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the License Agreement, Share Purchase Agreement, and Share Exchange Agreement.

Collaboration and License Agreement with Antion

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(Foresight Diagnostics).

Pursuant to the Foresight Agreement, the parties have agreed to collaborate on a non-exclusive basis in the development of Foresight Diagnostics' MRD assay as an in vitro diagnostic to identify the MRD+ patient population to be enrolled in our planned ALPHA3 trial of cemacabtagene ansegedleucel, or cema-cel (previously known as ALLO-501A) for treatment of large B cell lymphoma (LBCL).

Under the Foresight Agreement, we have agreed to use the commercially reasonable efforts to obtain regulatory approval of cema-cel, and Foresight Diagnostics has agreed to use its commercially reasonable efforts to obtain regulatory approval of an MRD assay for use as an in vitro diagnostic with cema-cel.

Pursuant to the Foresight Agreement, the parties have agreed to collaborate on a non-exclusive basis in the development of Foresight Diagnostics’ MRD assay as an in vitro diagnostic to identify the MRD+ patient population to be enrolled in our ALPHA3 trial of cemacabtagene ansegedleucel, or cema-cel (previously known as ALLO-501A) for treatment of large B cell lymphoma (LBCL).

Under the Foresight Agreement, we have agreed to use commercially reasonable efforts to obtain regulatory approval of cema-cel, and Foresight Diagnostics has agreed to use commercially reasonable efforts to obtain regulatory approval of an MRD assay for use as an in vitro diagnostic with cema-cel.

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Foresight Agreement.

Components of Results of Operations

As of March 31, 2024, our revenue has been exclusively generated from the License Agreement with Allogene Overland Biopharm (PRC) Co., Limited.

As of June 30, 2024, our revenue has been exclusively generated from the License Agreement with Allogene Overland PRC.

See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the License Agreement.

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To date, our research and development expenses have related primarily to discovery efforts, preclinical and clinical development, and manufacturing of our product candidates.

Research and development expenses for the three months ended March 31, 2024 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

Research and development expenses for the three and six months ended June 30, 2024 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

The most significant research and development expenses for the year to date relate to costs incurred for the development of our most advanced product candidates and include:

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Where contingent milestone payments are due to third parties under research and development arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are achieved.

We have reimbursed Servier for 60% of the costs associated with the prior development of UCART19, including for the long-term follow-up of patients in the CALM and PALL clinical trials of UCART19.

We believe Servier is required to reimburse us for 40% of the costs associated with the development of ALLO-501 and cema-cel.

Research and development activities are central to our business model.

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Interest and other income, net consists of interest earned on our cash and cash equivalents and investments, as well as investment gains and losses recognized during the period.

Other Expenses

Other expenses consist of non-operating expenses, including our share of equity investments' net losses for the period.

Other Income and Expense, Net

Other income and expense, net consist of non-operating income and expenses, including our share of equity investments’ net losses for the period.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following sets forth our results of operations for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Three Months Ended March 31, Change

Comparison of the Three Months Ended June 30, 2024 and 2023

The following sets forth our results of operations for the three months ended June 30, 2024 and 2023 (dollars in thousands):

Three Months Ended June 30, Change

2024 2023 $ %

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General and administrative 16,087 18,524 (2,437) (13) %

Impairment of long-lived assets

4,989 — 4,989 100 %

Total operating expenses 71,431 80,562 (9,131) (11) %

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Interest and other income, net 4,988 3,778 1,210 32 %

Other expenses (929) (2,935) 2,006 (68) %

Other income and expense, net

85 (2,470) 2,555 (103) %

Total other income (expense), net 5,073 1,308 3,765 288 %

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Collaboration revenue - related party

Collaboration revenue recognized for the three months ended March 31, 2024 and 2023 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Collaboration revenue recognized for the three months ended June 30, 2023 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement with Allogene Overland PRC.

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

2024 2023 Change

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Total research and development expenses 50,355 62,038 (11,683)

Our research and development expenses included $25.5 million of internal expenses and $26.8 million of external expenses for the three months ended March 31, 2024.

Our research and development expenses included $35.2 million of internal expenses and $45.1 million of external expenses for the three months ended March 31, 2023.

Research and development expenses were $52.3 million and $80.2 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease of $28.0 million was driven primarily by a decrease in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs of $14.6 million and a decrease in personnel related costs of $11.4 million, including $6.1 million related to a decrease in stock-based compensation expense.

Our research and development expenses included $22.1 million of internal expenses and $28.3 million of external expenses for the three months ended June 30, 2024.

Our research and development expenses included $31.1 million of internal expenses and $30.9 million of external expenses for the three months ended June 30, 2023.

Research and development expenses were $50.4 million and $62.0 million for the three months ended June 30, 2024 and 2023, respectively.

The decrease of $11.7 million was driven primarily by a decrease in personnel related costs of $10.4 million, including $2.2 million related to a decrease in stock-based compensation expense and a decrease in facilities and depreciation expense of $1.2 million.

General and Administrative Expenses

General and administrative expenses were $17.3 million and $18.9 million for the three months ended March 31, 2024 and 2023, respectively.

General and administrative expenses were $16.1 million and $18.5 million for the three months ended June 30, 2024 and 2023, respectively.

The decrease of $2.4 million was primarily due to a decrease in personnel related costs of $1.6 million, including $0.8 million related to a decrease in stock-based compensation expense.

Impairment of long-lived asset

In June 2024, we made a decision to sublease one of our leased buildings in South San Francisco.

We vacated and ceased occupancy of this building in June 2024 and currently we are actively marketing the leased building for sublease.

We recorded long-lived asset impairment charge based on the performed impairment analysis.

Interest and Other Income, Net

Interest and other income, net was $5.4 million and $2.1 million for the three months ended March 31, 2024 and 2023, respectively.

Interest and other income, net was $5.0 million and $3.8 million for the three months ended June 30, 2024 and 2023, respectively.

The increase of $1.2 million was due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Other Expenses

Other expenses were $0.9 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease in other expenses of $2.0 million was primarily due to a decrease in the share of net losses in our equity method investments.

Other Income and Expense, Net

Other income was $0.1 million and other expense was $2.5 million for the three months ended June 30, 2024 and 2023, respectively.

The decrease in other expenses of $2.6 million was primarily due to a decrease in the share of net losses in our equity method investments and gain from the Organizational Restructuring of Overland Therapeutics.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following sets forth our results of operations for the six months ended June 30, 2024 and 2023 (dollars in thousands):

Six Months Ended June 30,

2024 2023 $ %

Collaboration revenue - related party $ 22 $ 52 $ (30) (58) %

Operating expenses:

Research and development 102,614 142,276 (39,662) (28) %

General and administrative 33,354 37,408 (4,054) (11) %

Impairment of long-lived assets

4,989 — 4,989 100 %

Total operating expenses 140,957 179,684 (38,727) (22) %

Loss from operations (140,935) (179,632) 38,697 (22) %

Other income (expense), net:

Interest and other income, net 10,421 5,837 4,584 79 %

Other income and expense, net

(844) (5,405) 4,561 (84) %

Total other income (expense), net 9,577 432 9,145 2117 %

Net Loss (131,358) (179,200) 47,842 (27) %

Collaboration revenue - related party

Collaboration revenue recognized for the six months ended June 30, 2024 and 2023 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement with Allogene Overland PRC.

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented:

Six Months Ended June 30,

2024 2023 Change

Personnel $ 41,891 $ 63,748 $ (21,857)

Development costs 35,083 49,479 (14,396)

Facilities and depreciation 20,784 22,650 (1,866)

Other 4,856 6,399 (1,543)

Total research and development expenses 102,614 142,276 (39,662)

Our research and development expenses included $47.5 million of internal expenses and $55.1 million of external expenses for the six months ended June 30, 2024.

Our research and development expenses included $66.3 million of internal expenses and $75.9 million of external expenses for the six months ended June 30, 2023.

Research and development expenses were $102.6 million and $142.3 million for the six months ended June 30, 2024 and 2023, respectively.

The decrease of $39.7 million was driven primarily by a decrease in personnel related costs of $21.9 million, including $8.3 million related to a decrease in stock-based compensation expense, a decrease in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs of $14.4 million and a decrease in facilities, depreciation, and other expense of $3.4 million.

General and Administrative Expenses

General and administrative expenses were $33.4 million and $37.4 million for the six months ended June 30, 2024 and 2023, respectively.

The decrease of $4.1 million was primarily due to a decrease in personnel related costs of $3.3 million, including $1.6 million related to a decrease in stock-based compensation expense.

Impairment of long-lived asset

In June 2024, we made a decision to sublease one of our leased buildings in South San Francisco.

We vacated and ceased occupancy of this building in June 2024 and currently we are actively marketing the leased building for sublease.

We recorded long-lived asset impairment charge based on the performed impairment analysis.

Interest and Other Income, Net

Interest and other income, net was $10.4 million and $5.8 million for the six months ended June 30, 2024 and 2023, respectively.

The increase of $4.6 million was due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Other Income and Expense, Net

Other expenses, net were $0.8 million and $5.4 million for the six months ended June 30, 2024 and 2023, respectively.

The decrease in other expenses of $4.6 million was primarily due to a decrease in the share of net losses in our equity method investments and gain from the Organizational Restructuring of Overland Therapeutics.

Liquidity and Capital Resources

To date, we have incurred significant net losses and negative cash flows from operations.

As of March 31, 2024, we had $397.3 million in cash and cash equivalents and investments.

As of June 30, 2024, we had $444.6 million in cash and cash equivalents and investments.

We anticipate that the aggregate of our current cash and cash equivalents and investments available for operations will be sufficient to fund our operations for at least the next 12 months from the date this Quarterly Report is filed with the SEC.

Our operations have been financed primarily by net proceeds from the sale and issuance of our convertible preferred stock, the issuance of convertible promissory notes, net proceeds from our IPO, our at-the-market (ATM) offerings, our June 2020 underwritten public offering, and upfront cash payment of $40.0 million received in December 2020 pursuant to our License Agreement with Allogene Overland.

Our operations have been financed primarily by net proceeds from the sale and issuance of our convertible preferred stock, the issuance of convertible promissory notes, net proceeds from our IPO, our at-the-market (ATM) offerings, our June 2020 underwritten public offering, our May 2024 registered offering, and an upfront cash payment of $40.0 million received in December 2020 pursuant to our License Agreement with Allogene Overland PRC.

In November 2019, we entered into a sales agreement with Cowen and Company, LLC (Cowen), as amended on November 2, 2022 and November 2, 2023, under which we may from time to time issue and sell shares of our common stock through Cowen in ATM offerings.

During the three months ended March 31, 2024, we did not sell any shares of common stock in ATM offerings.

During the three and six months ended June 30, 2024, we sold an aggregate of 250,000 shares of our common stock in ATM offerings resulting in net proceeds of $1.0 million.

The specified dollar limit on the amount of common stock that may be sold under the sales agreement was removed pursuant to the November 2, 2023 amendment to the sales agreement.

In March 2024, we filed a sales agreement prospectus within a registration statement on Form S-3, registering the offering, issuance and sale of up to $250.0 million of our common stock in ATM offerings.

On May 13, 2024, we entered into (i) an underwriting agreement (Underwriting Agreement) with Goldman Sachs & Co.

LLC (Underwriter) and (ii) a Securities Purchase Agreement (Securities Purchase Agreement) with certain members of our Board of Directors and our executive officers or their respective affiliates (Purchasers), pursuant to which we sold and issued to the Underwriter and the Purchasers an aggregate of 37,931,035 shares of our common stock resulting in net proceeds of $105.2 million in a registered offering transaction that closed on May 16, 2024.

The following table summarizes our cash flows for the periods indicated:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Operating Activities

During the three months ended March 31, 2024, cash used in operating activities of $55.9 million was attributable to a net loss of $65.0 million, a decrease of $4.4 million in our net operating assets and liabilities, partially offset by non-cash charges of $13.5 million.

The non-cash charges consisted primarily of stock-based compensation expense of $11.9 million, depreciation of $3.6 million, our share of equity investments' net losses for the period of $0.9 million, offset by net amortization and accretion on investment securities of $2.8 million.

The change in operating assets and liabilities was primarily due to a $5.7 million decrease in accrued and other current liabilities, offset by a $1.4 million decrease in other long-term assets.

During the three months ended March 31, 2023, cash used in operating activities of $66.6 million was attributable to a net loss of $100.0 million, partially offset by non-cash charges of $25.9 million and an increase of $7.4 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $18.8 million, depreciation of $3.5 million, our share of equity investments’ net losses for the period of $2.9 million, net amortization and accretion on investment securities of $0.5 million, and non-cash rent expense of $0.2 million.

The change in operating

assets and liabilities was primarily due to a $5.7 million increase in accrued and other current liabilities, a $1.3 million decrease in prepaid expenses and other current assets, and a $1.1 million increase in accounts payable, offset by a $0.6 million decrease in other long-term liabilities.

During the six months ended June 30, 2024, cash used in operating activities of $119.5 million was attributable to a net loss of $131.4 million and a decrease of $21.2 million in our net operating assets and liabilities, partially offset by non-cash charges of $33.1 million.

The non-cash charges consisted primarily of stock-based compensation expense of $25.5 million, impairment of long-lived assets of 5.0 million, depreciation of $7.2 million, and our share of equity investments’ net losses for the period of $0.6 million, partially offset by net amortization and accretion on investment securities of $5.0 million.

The change in operating assets and liabilities was primarily due to a $21.4 million deposit placed in escrow related to the Servier Amendment, a $6.7 million decrease in accrued and other current liabilities, and a $2.0 million increase in prepaid expenses and other current assets, partially offset by a $6.7 million increase in accounts payable and a $2.1 million decrease in other long-term assets.

During the six months ended June 30, 2023, cash used in operating activities of $128.5 million was attributable to a net loss of $179.2 million, partially offset by non-cash charges of $47.6 million and an increase of $3.1 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $35.4 million, depreciation of $7.2 million, our share of equity investments' net losses for the period of $5.4 million, and non-cash rent expense of $0.4 million, partially offset by net amortization and accretion on investment securities of $0.6 million.

The change in operating assets and liabilities was primarily due to a $5.6 million increase in accrued and other current liabilities and a $1.4 million decrease in prepaid expenses and other current assets, partially offset by a $3.2 million decrease in accounts payable and a $0.6 million decrease in other long-term liabilities.

Investing Activities

During the three months ended March 31, 2024, net cash provided by investing activities of $22.1 million was related to cash provided by investment maturities of $103.3 million, offset by cash used in the purchase of investments of $81.1 million.

During the three months ended March 31, 2023, net cash provided by investing activities of $112.9 million was related to cash provided by investment maturities of $143.4 million and cash provided by proceeds from sales of investments of $5.6 million, offset by cash used in the purchase of investments of $35.1 million and cash used in the purchase of property and equipment of $1.0 million.

During the six months ended June 30, 2024, net cash provided by investing activities of $96.7 million was related to cash provided by investment maturities of $220.5 million, partially offset by cash used in the purchase of investments of $123.7 million.

During the six months ended June 30, 2023, net cash provided by investing activities of $130.1 million was related to cash provided by investment maturities of $296.3 million and cash provided by investment sales of $5.6 million, partially offset by cash used in purchases of investments of $170.5 million and cash used in the purchase of property and equipment of $1.3 million.

Financing Activities

During the three months ended March 31, 2024, cash provided by financing activities of $1.7 million was related to $0.9 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.8 million of cash provided by the issuance of common stock upon exercise of stock options.

During the three months ended March 31, 2023, cash provided by financing activities of $1.7 million was related to cash provided by the sale of common stock through our employee stock purchase plan.

During the six months ended June 30, 2024, cash provided by financing activities of $110.3 million was related to $105.3 million in net proceeds from the issuance of common stock through our May 2024 registered offering, $1.0 million of net proceeds from the issuance of common stock through ATM transactions, $2.3 million of cash provided from the CIRM award, $0.9 million of cash provided by the sale of common stock through our employee stock purchase plan, and $0.8 million of cash provided by the issuance of common stock upon exercise of stock options.

During the six months ended June 30, 2023, cash provided by financing activities of $91.3 million was related to $87.9 million in net proceeds from the issuance of common stock through ATM transactions, $1.7 million of cash provided by the sale of common stock through our employee stock purchase plan, and $1.6 million of cash provided by the issuance of common stock upon exercise of stock options.

Material Cash Commitments and Requirements

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The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements.

As of March 31, 2024, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of June 30, 2024, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

For additional information regarding our agreements, see Note 6 to our condensed consolidated financial statements included elsewhere in this report.

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For additional information regarding our lease obligations, see Note 7 to our condensed consolidated financial statements included elsewhere in this report.

contracts in the normal course of business with contract research organizations for clinical trials and other vendors for other services and products for operating purposes.

Additionally, we have entered into agreements with third-party contract manufacturers for the manufacture and processing of certain of our product candidates for clinical testing purposes, and we have entered and will enter into other contracts in the normal course of business with contract research organizations for clinical trials and other vendors for other services and products for operating purposes.

These agreements generally provide for termination or cancellation, other than for costs already incurred.

As of March 31, 2024, the Company had non-cancellable purchase commitments of $0.9 million.

As of June 30, 2024, the Company had non-cancellable purchase commitments of $0.7 million.

On October 6, 2020, we announced we entered into a strategic five-year collaboration agreement with MD Anderson for the preclinical and clinical investigation of allogeneic CAR T cell product candidates.

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Where any legal or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically.

On January 3, 2024, we entered into the Foresight Agreement with Foresight Diagnostics.

We agreed to fund approximately $26.2 million in MRD assay development costs, milestone payments for regulatory submissions and assay utilization to process clinical samples.

For additional information regarding this agreement, see Note 6 to our condensed consolidated financial statements included elsewhere in this report.

In July 2020, we entered into a Solar Power Purchase and Energy Services Agreement for the installation and operation of a solar photovoltaic generating system and battery energy storage system at our manufacturing facility in Newark, California.

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We are obligated to pay for electricity generated from the system at an agreed rate for the duration of the agreement term.

Termination of the agreement by us will result in a termination payment due of approximately $4.3 million.

Termination of the agreement by us will

result in a termination payment due of approximately $4.3 million.

In connection with the agreement, we maintain a letter of credit for the benefit of the service provider in the amount of $4.3 million.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis